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Guandian.comSince Jinmao Service fired the "first shot" of mergers and acquisitions in the new year in January this year, the long-dormant property management M&A market has finally made a splash again, but this time the property management companies are playing the role of the acquired party rather than the acquirer.

On the evening of July 22, Fuxing Co., Ltd. issued an announcement stating that a framework agreement had been signed between Fuxing Co., Ltd. and Chenrui Enterprise Management, and the former planned to acquire 100% of the equity of Huizhimei Life Service Group Co., Ltd. held by the latter.

Currently, the acquisition is still in the planning stage, so many details, including the acquisition amount, have not been disclosed, and there is no "certainty" whether the transaction will eventually be realized. However, if the transaction is successful, it may become the largest property company acquisition this year.

Where does the money come from?

At the beginning of this year, Jinmao Service also carried out a merger and acquisition.

On January 18, Jinmao Services announced that it had acquired all the shares of Beijing Runwu Jiaye for approximately RMB 324 million. It is understood that Runwu Jiaye mainly conducts business through its subsidiary Beijing Shengrui Property, and holds 80% of its shares.

As of the end of 2023, the contracted construction area of ​​Beijing Shengrui Property and its subsidiaries was approximately 8.66 million square meters, of which the managed construction area was approximately 7.98 million square meters.

During the same period, Huizhimei Group managed nearly 100 projects with a service area of ​​over 20 million square meters. The group had total assets of 758 million yuan, liabilities of 647 million yuan, and net assets of 111 million yuan; its revenue in 2023 was 559 million yuan, and its net profit was 35.3317 million yuan, which has exceeded the net profit scale of Fuxing Shares by more than half last year.

In terms of scale, Huizhimei Group is larger than Beijing Runwu Jiaye, so Fuxing shares may have to pay more than Jinmao Services. According to the announcement, in this equity transaction, Fuxing shares will use its own funds for the acquisition.

Where does Fuxing Shares' money come from?

On December 28 last year, Fuxing completed the issuance of 223.4918 million shares to 14 private placement targets, becoming the first private real estate company to successfully raise funds in the "third arrow". Through this private placement plan, Fuxing raised a total of 814 million yuan, and the net amount of funds raised after deducting issuance expenses was 806 million yuan.

Fuxing Holdings had already made plans for this money.

Since the actual funds raised were less than the planned funds, Fuxing Co., Ltd. made corresponding adjustments to the use of funds: among them, the funds originally planned to be invested in the Hongqiao City K6 residential project were reduced from 256 million yuan to 150 million yuan; the funds invested in the Hongqiao City K15 project were reduced from 685 million yuan to 416 million yuan; and the funds used to supplement the working capital project were reduced from 400 million yuan to 240 million yuan.

After receiving the money, Fuxing Shares used it immediately.

By the end of last year, the net amount of the 806 million yuan raised was only 63.857 million yuan, of which 200 million yuan was used to temporarily supplement working capital, and about 545 million yuan was used to replace the initial investment in the fundraising project, thus improving the company's cash flow.

On the other hand, on February 5, the "Xingyu International K12, K13 plots" project under Fuxing Holdings was successfully shortlisted in the first batch of real estate financing projects in Wuhan; on July 10, the company's wholly-owned subsidiary Sanyanqiao Real Estate (the implementing entity of the above-mentioned fixed increase plan) obtained a total of 100 million yuan in financing loans from Zhejiang Commercial Bank. The company's financial pressure has been further alleviated.

Only when you have money can you have confidence, and therefore Fuxing Shares can have different "thoughts".

Seeking a way out

Fuxing Holdings' business is divided into two major sectors: real estate and metal products, of which the real estate business accounts for nearly 80% of its revenue. Its business scope is mainly distributed in the central urban area of ​​Wuhan, and it was once hailed by the market as "the number one in Wuhan."

In addition, Fuxing Co., Ltd. was one of the first companies to participate in the renovation of Wuhan's "three old" (urban villages, old towns, and old factories), and has formed urban renewal development models such as "urban village renovation" and "old town renovation". It is the largest urban village renovation and old town renovation developer in Hubei.

However, although the old town renovation brought honor to Fuxing Shares, it failed to generate substantial profits during the adjustment period.

In 2023, the company recorded operating income of 5.508 billion yuan, a year-on-year decrease of 63.62%; net profit for the year was about 103 million yuan, a year-on-year decrease of about 27.03%; of which net profit attributable to the parent company was 68.3328 million yuan, a year-on-year decrease of 35.0%. In 2024, the company's first-quarter revenue further decreased by 21.39% year-on-year to 1.085 billion yuan.

Under performance pressure, Fuxing Co., Ltd. urgently needs to find an answer.

Now it seems that the acquisition of Huizhimei Group may be one of the solutions found by the company. This is not surprising. In the current market environment, real estate companies are competing for product strength, and good property services are also an important manifestation and plus point of product strength.

Although the transaction of Fuxing Holdings' acquisition of Huizhimei Group does not constitute an affiliated transaction, there is some overlap between the two.

According to information, Huizhimei Group was established in September 2000 and its headquarters is also located in Wuhan. Its business is deeply rooted in the Wuhan area and has gradually radiated to Beijing, Chengdu, Ningbo, Xi'an, Yueyang and other places, with a large overlap in business scope with Fuxing Shares.

Huizhimei Group mainly consists of three business segments: basic property services, value-added services for owners and other value-added services. It has subsidiaries including property, technology, elevators, engineering, smart parking lots, community value-added, integrated media, security, elderly care, landscaping, and cleaning. Its ability to provide full-chain services for community life is relatively outstanding.

Currently, the business types managed by Huizhimei Group include residential buildings, office buildings, commercial complexes, public properties and high-tech industrial parks.

Fuxing Holdings' products in the real estate development business segment are mainly residential real estate, supplemented by commercial real estate. Huizhimei Group's property management capabilities can perfectly cover the company's projects. Most importantly, many projects under Fuxing Holdings are provided services by Huizhimei Group, including Fuxing Huiyu Art City Yunxi, Fuxing Huiyu Shanyu Jiangyuan, Fuxing Huiyu Xingyu International, Fuxing Huiyu Fulai Center, etc.

With many years of cooperation, the two parties know each other well. Therefore, Fuxing Holdings' acquisition of Huizhimei Group should be a well-considered decision, and it is also an attempt by the company to get rid of the dilemma of declining profits.

As Fuxing Holdings stated in the announcement, this acquisition will further strengthen the business synergy between the company's main real estate business and property services. After the acquisition is completed, the company can better focus on long-term strategies and more accurately share and integrate resources between real estate and property, which will help the company further improve its product and service capabilities and promote the company's long-term sustainable development.

In addition to the planned acquisition of Huizhimei Group, Fuxing shares has also set its sights on the new energy track based on its own metal products business.

As early as August last year, Fuxing Co., Ltd. cooperated with Shanghai Baotan New Energy and Shanghai Jintanhao Environmental Energy to jointly establish Fuxing Baotan Energy. With the help of this platform, Fuxing Co., Ltd. tried to find development opportunities in the field of "carbon neutrality" and tried to create the company's second growth curve.

On July 5 this year, the company cooperated with investment institution Hubei Ronghan Gongjin to establish an investment fund called Fuxing New Quality Productivity Transformation Fund (Limited Partnership). The fund has a scale of 2 billion yuan and is mainly invested in cutting-edge industries such as biomedicine, artificial intelligence, new energy and new materials.

On the one hand, it is actively improving product strength, and on the other hand, it is seeking to create a second growth curve. Fuxing Co., Ltd.'s "self-rescue" journey is still on the way.